Surviving Trade Liberalization
Marketing has been a major problem for the Asian farmers for decades. Recently, it has become much worse under WTO, as the world moves into a new era of global free trade. In May, FFTC held an international seminar on how Asian farmers can survive in an era of global free trade
Now new help is urgently needed. Under WTO, Asian countries can no longer protect their domestic market from cheap imported food. Multinational agribusiness, armed with modern marketing skills, is gaining increasing power in the markets of Asia. This makes it very difficult for the products of small-scale farmers to compete with imported farm products. For Asian farming to survive, the region's farmers must become more competitive in their marketing, including the promotion of their local products.
The Basis for Change
In every Asian country, the market environment is changing. Consumer tastes are becoming global, as is the trade in agricultural products. There are new shippers, packers, wholesalers and retailers. In the new marketing system, food products are collected directly from producers and shippers, and distributed to urban retailers without passing through conventional wholesale markets.
Big Business and Small Farmers
Increasingly, the domestic markets of Asian countries are becoming dominated by a relatively few large foreign distributors. It is interesting to compare the situation in Japan with that in Korea. Large foreign distributors seem to have had a significant impact on the Korean domestic market. They have had much less effect in Japan. Differences in consumer preferences, culture and development stage may explain these different outcomes.
Achieving Economies of Scale
The merging of marketing cooperatives is essential for gaining economies of scale so as to improve their efficiency. Denmark was one of the first countries in the world to develop a strong agricultural cooperative system. The last few years have seen a series of mergers in Denmark. The number of dairy cooperatives, for example, has fallen from 1400 to 14. Another way to gain economies of scale is a strategic alliance between cooperatives on the one hand, and food processors and distributors on the other hand. This strategy has been followed with considerable success in several Asian countries, including Indonesia and Malaysia.
The Role of Wholesale Markets
As the direct marketing of farm products through supermarkets and large distributors grows, the wholesale markets become less important. However, the past experience of developed countries shows how important it is to establish wholesale markets in developing countries. For wholesale markets to succeed, it is important that they are large enough, and have computerized operations.
Fair Access to International Markets
Many people in developing countries feel strongly that the rules governing market liberalization are unfair. Wealthy countries such as USA are giving farmers large subsidies. For example, a new farm bill passed this year involves a substantial increase in subsidies for US producers of corn, cotton, peanuts, wheat and many other products. European countries also pay large subsidies to farmers.
Subsidies allow farmers in industrialized countries to sell produce overseas cheaply, at the expense of local small-scale farmers who have to pay all their own costs. Subsidies also lead to overproduction, which drives world prices down. Protectionist policies such as tariffs and quotas keep out products from poor countries. A more level playing field would allow Asian countries to get more benefit from agricultural trade.
Attributes of an Efficient Marketing System
Paper presentations from eleven countries at the FFTC seminar made it clear that there are many successful ways of solving the marketing problems of farmers. Good performance and efficiency in a country's agricultural marketing system can be judged in several ways. However, if a marketing system is to benefit the majority of small-scale farmers, rather than a few large corporations, the following factors are essential.
- An effective extension system;
- Government policies to promote planned production and marketing programs;
- A cooperative marketing system for agricultural produce;
- Accessible assembly points in main production areas;
- The establishment of auction wholesale markets in urban areas;
- A good market information system for farmers;
- Promotion of food processing to raise demand, and therefore farm prices and farmers' incomes; and,
- A sufficient supply of soft loans to small-scale farmers.?
Conclusion
No one marketing model fits every situation. We should understand agricultural marketing in the context of evolution. At a certain stage, wholesale markets are useful and necessary. Later, the wholesale markets may disappear. This does not mean a failure of the wholesale market as a system, but simply that the marketing system has moved on to a new stage of development. In fact, later development of the marketing system would probably have been impossible, if there had not been wholesale markets at an earlier stage.
Secondly, whether we are thinking of one country's marketing system or the international marketing system, it is important to develop some kind of sustainable agricultural market. A market is created by the mutual interests of all the agents who come to the marketplace. Thus, there has to be some mutual interest, not only between producers and consumers, but also between developed and developing countries.
Thirdly, the main benefit for growers in forming agricultural cooperatives, or in merging existing ones, is to achieve economies of scale and avoid exploitation by big business. However, even though these benefits are obvious, increasing the scale of operations should be approached with caution.
In an agricultural cooperative, the growers are also the managers. Very good growers who can produce high yields of good quality are not necessarily good business managers. There is a possibility that a cooperative may outgrow the business skills of its managers. There are cases of cooperatives which used to be large and successful, but which have gone bankrupt because of a poor business decision.
Index of Images
Figure 1 Electronic Auction of Pork, Garak-Dong Wholesale Market, Seoul, Korea. Note the Small Boxes in Front of the Participants, with Which They Signal Their Bids.
Figure 2 Monitor Showing the Bids for the Pork Carcasses.
